How to Sell your Company

Is it time to sell your company?

Scrutinise your business and make an honest and objective assessment.  Where do things stand and how do you see the future?  Whether your business is struggling, you want to retire, move on, or look at other opportunities, it’s important to make an exit plan.

Preparing for an Exit

1. Get your house in order – Few companies are completely up to date with all their records, financials, compliance, etc and so these should be checked and updated to ensure they are correct and compliant before you start the sale process.

2. Get valuations and tax advice – You’ll need your accountants to obtain a value for the company and tax advice to ensure you obtain all available tax reliefs.

3. Appoint the right team – Accountants and tax advisers should be involved at an early stage of the exit plan. Once an offer has been made for the Company/business, it’s important to instruct a legal team who are experienced in the sale (or acquisition) of companies and can guide you through what is often a long and complicated process, making things as simple and painless as possible.

The Legal Aspects of Selling your Company

Preparation Phase:

1. Heads of Terms – these should set out the principal terms of the deal agreed between the sellers and the buyer.

2. Confidentiality/Non-Disclosure Agreements need to be in place with the prospective buyer at an early stage.

3. Legal Due Diligence: The buyer’s legal advisers will often send a very lengthy set of questions covering all aspects of the company to undertake their review and you will need to spend considerable time answering questions and uploading all relevant documents and supporting information to a virtual data site.

Structuring the Deal:

1. You’ll need to consider whether to sell shares or assets. For more information on the differences between these, please see our blog Buying or Selling a Business: Shares or Assets https://www.mlplaw.co.uk/buying-or-selling-a-business-shares-or-assets/

2. Purchase Agreement – usually the buyer’s solicitors prepare a share purchase agreement (or asset purchase agreement) which will be a comprehensive purchase agreement negotiated between the legal professionals, specifying terms, price, payment, warranties and obligations, etc.

3. Disclosure Letter – disclosure is the process whereby sellers make disclosures against the warranties they give in the Sale & Purchase Agreement and such disclosures will, where appropriate, qualify the warranties.

Completing the Deal:

Once all the key documents have been prepared, negotiated and agreed and the buyer has the relevant funds to make the purchase, the documents can be signed and exchanged.  Often in corporate transactions, exchange and completion will be simultaneous, although there may be an exchange with completion conditional upon certain conditions being met.

Selling a company requires careful consideration of legal aspects. Engaging legal professionals and addressing issues proactively will enhance the likelihood of a smooth sale. Seek tailored legal advice from solicitors with suitable experience in these transactions throughout the process to ensure success.  For assistance with any enquiries relating to the sale of your company (or the acquisition of a company) please contact corporate@mlplaw.co.uk